Monday, October 05, 2009 by Jim
Interesting debate on yesterday morning’s Today programme, which was covering the big business story of the day: the question of whether we should give a state-funded boost to the manufacturing industry, which is struggling under the weight of low consumer confidence.
Think tank The Work Foundation released a report yesterday saying we should. It maintained the sector is ‘extremely important for jobs, exports and GDP’, but others argue the government needs to find somewhere to draw the line – after all, what happens when hairdressing hits a record low? Will that require a bailout?
The sector also represents a vast portion of the economy: manufacturing employs almost three million workers and makes up roughly 13% of the UK’s GDP – but some argue it’s a dying industry. “We have to understand what a modern manufacturing sector is going to look like in the United Kingdom, and it’s not going to look like a mass market manufacturing sector,” said Richard Jeffrey, chief investment officer at Cazanove Capital Management on the programme.
He’s right: as businesses have outsourced their manufacturing to cheaper countries, the sector has been transformed – but that doesn’t mean it’s dying. Ian Brinkley, associate director at The Work Foundation, argued while money is no longer coming in from product manufacture, the money now is in servicing manufactured goods.
“A company like Rolls Royce, for example, gets most of its value added and most of its profits not from its engines, but from the services which go alongside them. I think we will see production go overseas but I think we will hold on to the high-value service end, and that’s the base we really must support, because that’s the thing we are competitive in,” he pointed out.
The report’s point is, Britain needs a manufacturing industry, whatever form it takes, and Smarta is inclined to agree. It's like John Humphreys noted: “We can’t all end up cutting each others' hair”.